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One of the most prevalent and valid criticisms of blockchain technology, as it has been developed over the past decade, is the dramatically high levels of carbon emissions it can produce. At first, therefore, the prospect of a blockchain that is not just carbon neutral but carbon negative may seem too good to be true. Algorand however is one of the first, if not the world’s first, carbon-negative blockchains. Two factors have made this astonishing accomplishment possible. The first is Algorand’s underlying low-usage energy per transaction, and the second is the way this excess low energy usage is offset through strategic partners.
Why Do Blockchains Produce So Much Waste to Begin With?
Before deep-diving into how Algorand is carbon negative, it is important to consider why other blockchains produce high levels of carbon emissions. As discussed in previous articles, proof-of-work (PoW) blockchains emit huge volumes of wasted energy during the mining process. Mining requires nodes on the network to compete against each other to solve a cryptographic problem and obtain reward coins. Because of how competitive this process is, with thousands of nodes trying to solve the same problem at once, Algorand has estimated that the Bitcoin blockchain produces as much as 930 kilowatt hours per transaction [kWh/txn]. This amounts to roughly 807.21 kg of CO2 per transaction, similar to the energy used to complete 1,789,055 VISA transactions. In an effort to combat this, Ethereum made PoW more efficient. As a result, Ethereum produces a considerably reduced 70 kWh/txn. Although this is a marked improvement on Bitcoin, this method still emits 69.51 kg of CO2 per transaction on Ethereum, which is the same as 154,058 VISA transactions.
Algorand’s Low Energy Usage
Algorand by contrast employs pure PoS (PPoS): a validation system Algorand founder Silvio Micali created. One of the key features of PPoS is the remarkably modest computing output it requires to run, resulting in an output of just 0.000008 kWh/txn. This output produces just 0.0000004 kg of CO2 compared to US average electricity source emissions of 0.50 kg of CO2 per kWh, or less than one VISA transaction. This means that, even if Algorand were implemented by the entire global economy for all transactions, its carbon output would remain remarkably low. Delegated PoS models that use a small, select committee of nodes to validate blocks have similarly low levels of carbon output, but Algorand has a key differentiating factor. Algorand can maintain this low energy output while still upholding security, scalability and decentralisation, which has proved problematic for delegated PoS models that centralise power in their committees. Additionally, the Algorand team has endeavoured to offset these emissions even further.
In 2021, Algorand announced a strategic partnership with Climatetrade, a Spanish environment company that leverages the Algorand Blockchain to facilitate carbon offsetting. Climatetrade set up smart contracts on Algorand with its clients to lock the equivalent amount [P37] of carbon credits as an ASA (Algorand Standard Asset) into a green treasury so that its[P38] protocol keeps running as carbon negative. Upon execution of the contract, Climatetrade will arrange with a partner environmental organisation to spend the carbon credits accumulated and offset emissions as outlined in the smart contracts. Some of the notable environment partners that Climatetrade works with include The Southern Cardamom REDD+ Project, The Vichada Gold Standard Climate Project, The Oaxaca Wind Project and The Sumatra Merang Peatland Project. Its portfolio is constantly growing.
Solving the Fourth Issue of the Blockchain Trilemma
Algorand is often marketed as the blockchain that can solve all three aspects of the blockchain trilemma: security, scalability and decentralisation. Algorand is secured by its lottery-based block validation system, made scalable by its rapid transaction speeds, and decentralised by allowing all nodes on the network to partake in block validation. Algorand also provides a fourth crucial element, sustainability. As investors continue to prioritise green technologies to combat climate change, Algorand is well-positioned to become a global leader by setting itself up from the outset to be carbon negative. Climatetrade is a ground-breaking company leveraging Algorand. It is in the pole position to onboard new clients, including major corporations, as climate offsetting becomes increasingly crucial for investment opportunities. Its service offers a transparent and accountable way for companies to partake in carbon offsetting through Algorand smart contracts.
